Municipals hit again as issuers get BABs in under the wire; New York City sells $1.35 billion

By Sheri Kasprzak

New York, Dec. 15 - Municipal yields were once again weaker in Wednesday's session, but the weakness was minimal compared to recent days, market insiders said.

Issuers are still eager to fit in their Build America Bonds before the rapidly approaching yearend, and the supply might have been the driving factor of Wednesday's slump.

"We're still weak, but not off by as much as yesterday [Tuesday]," said one trader.

"Probably 1 or 2 bps."

The trader noted that a steady stream of Build America Bonds is filtering into the primary market as the end of the year approaches because there's still a lot of uncertainty about the existence of the BABs program beyond 2010.

Despite the influx of BABs, Alan Schankel, managing director with Janney Montgomery Scott LLC, said Wednesday that BABs are holding up relatively well.

"Spreads are unchanged to slightly tighter, although absolute yields continue to rise, following Treasuries," he noted.

Most of the pressure on the market, Schankel said, has been on the long end of the curve.

NYC brings G.O.s

Looking at Wednesday's heavy primary action, the City of New York headlined with a $1.35 billion sale of series 2011 general obligation bonds through J.P. Morgan Securities LLC, said a pricing sheet.

The deal included $902 million of series 2011F-1 Build America Bonds, $148 million of series 2011F-2 taxable bonds, $245 million of series 2011G tax-exempt bonds and $55 million of series 2011H tax-exempt bonds.

The 2011F-1 bonds are due 2018 to 2024 with term bonds due 2031 and 2037. The serial coupons run from 4.787% to 5.887%, all priced at par. The 2031 bonds have a 6.646% coupon priced at par and the 2037 bonds have a 6.271% coupon priced at par.

The 2011F-2 bonds are due 2012 to 2017 with 1.62% to 4.13% coupons, all priced at par.

The 2011G bonds are due 2012 to 2020 with 3% to 5% coupons and the 2011H bonds are due 2011 to 2020 with 2% to 5% coupons.

Proceeds will be used to fund capital expenditures.

Pennsylvania prices bonds

Elsewhere in the Northeast, the Commonwealth of Pennsylvania came to the competitive market with $650 million of series 2010 general obligation bonds (Aa1//AA+) - $466.605 million of which were BABs, said a pricing sheet.

The deal included $171.895 million of series 2010A tax-exempt bonds, $466.605 million of series 2010B Build America Bonds and $11.5 million of series 2010C tax-exempt bonds.

Barclays Capital Inc. won the BABs and Citigroup Global Markets Inc. took the tax-exempts.

The 2010A bonds are due 2012 to 2018 with 5% coupons across the board. The 2010B bonds are due 2019 to 2024 with a term bond due in 2030. The serial coupons range from 4.05% to 5.05%. The 2030 bonds have a 5.85% coupon priced at 99.879. The 2010C bonds are due 2012 to 2030 with 0.6% to 4.75% coupons.

Proceeds will be used to finance capital projects, provide grants and loans for water supply and sewage treatment improvements and to fund environmental initiatives.

Massachusetts drives deal

In other primary action, the Commonwealth of Massachusetts sold $576.125 million of series 2010A commonwealth transportation revenue recovery zone economic development bonds, said a term sheet.

The bonds (Aaa/AAA/) were priced through J.P. Morgan Securities LLC.

The bonds are due 2024 to 2025 with term bonds due 2030 and 2040. The serial coupons range from 5.053% to 5.203%, both priced at par. The 2030 bonds have a 5.631% coupon priced at par and the 2040 bonds have a 5.731% coupon priced at par.

The state plans to use the proceeds to finance bridge improvements.

Atlanta prices airport bonds

Flying down South, the City of Atlanta brought $504.915 million of series 2010C airport general revenue refunding bonds on Wednesday, said a pricing sheet.

The bonds were sold on a negotiated basis with Citigroup Global Markets Inc. and Loop Capital Markets LLC as the senior managers.

The bonds are due 2012 to 2025 with a term bond due in 2030. Serial coupons range from 2% to 5.875%. The 2030 bonds have a split maturity with a 5.25% coupon and a 6% coupon. The full pricing details were unavailable Wednesday evening.

Proceeds will be used to refund the city's series 2003RF/B-C bonds issued for airport improvements, as well as to terminate a swap agreement related to the bonds.

San Francisco water debt sold

Out West, the Public Utilities Commission of the City and County of San Francisco priced $351.47 million of series 2010G water revenue Build America Bonds, said a pricing sheet.

The bonds (Aa2/AA-/) were sold competitively, but calls to the issuer for the winning bidder were not returned by press time Wednesday evening.

The bonds are due Nov. 1, 2050, and have a 6.95% coupon priced at 101.005.

Backstrom McCarley Berry & Co. LLC was the financial adviser.

Proceeds will be used to construct, acquire and equip improvements to the city and county water system.

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